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Assume there are only two firms in the wine industry. Assume these firms cooperate and that...

Assume there are only two firms in the wine industry. Assume these firms cooperate and that they only compete with regards to advertising. Both firms know they face the following payoff matrix. Assume this is a one-period game.

Firm A

Increase Advertising                           Decrease Advertising

              Increase                     100,100                                   10,200

              Advertising           

Firm B

              Decrease                   200,10                                     150,150

              Advertising

Assume the payoffs are the firm's profits (in millions of dollars).

(A) Given the above payoff matrix, what strategies will Firm A and Firm B pursue?

(B)   Assume now that the game lasts 10 periods. What strategies will the firms pursue?

(C) Assume the game never ends. What strategies will the firms pursue?

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Answer #1

vem A Increar Adv. DeireadiAds 10,200 von B Increase Adr 100, 100 1 50, 150 Deras 200, 10 Adventisa (Increase Advertis cant,

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